On the heels of Friday’s gold and silver smash, Marc Faber warned King World News about the extraordinary dangers that will cause destruction in the global financial system.

This is part II of a series of written interviews that will be released today on KWN in which Faber discusses the end game, government theft, how investors can protect themselves, gold, silver, bail-ins, central planner actions, global markets, and much more.

Eric King: “What is the biggest danger in the financial world as you see it?”

Faber: “I think we have many dangers. The biggest danger is governments themselves with their interventions into free markets, and their fiscal policies....

In other words, increasing or decreasing government spending.

Usually it’s an increase, and as a result the government becomes larger and larger.

Of course the larger a government becomes, the less economic growth you will have.

The extremist, socialist-to-communist economy that we had in the Soviet Union and China, it was a complete failure economically speaking.

The other danger is that the Federal Reserve and other central banks around the world, they think they can essentially steer economic activity by printing money.

This money printing has a number of unintended consequences that will eventually be very costly.

It’s not the first time the Fed has intervened.

They intervened after the S&L crisis, after the Tequila crisis, after LTCM in 1998, and then after (the year) 2000 when the Nasdaq collapsed.

They kept interest rates artificially low which led to a credit bubble, the housing boom and subsequent collapse.

You can postpone the problems by printing money, but then the problem comes back to an even larger extent.”

Eric King: “We’ve been talking about the one quadrillion dollars of derivatives here at KWN recently, Marc.

Does the sheer amount of derivatives risk the danger of a 2008 style collapse? Is that (risk) still out there?”

Faber: “Yes. If you look back at 2007, before the crisis occurred, and today, the level of credit in the world has increased. The imbalances have also increased.

And the sovereign credit of countries has essentially diminished in quality.

Now we have a huge bond market rally because of artificially low interest rates, but I think the next stage in the rolling crisis that we will have will be sovereign defaults.”

"The question is not 'tapering'," Marc Faber exclaims to his hosts on CNBC's Squawk Box this morning,

"the question is at what point will they increase the asset purchases to say $150 [billion] , $200 [billion], or a trillion dollars a month."

QE-4-EVA is here to stay, as Faber explained "every government program that is introduced under urgency and as a temporary measure is always permanent."

Simply put, "The Fed has boxed itself into a position where there is no exit strategy," and while inflation may not be present in the 'chosen' indicators, Faber blasts, there's been incredible asset inflation -

"we are the bubble. We have a colossal asset bubble in the world [and] a leverage or a debt bubble."

There will be massive wealth destruction, he concludes, "one day this asset inflation will lead to a deflationary collapse one way or the other. We don't know yet what will cause it."

The Fed is Boxed In....

---

The world is in a gigantic bubble...

---

Back in April 2012, Faber said the world will face "massive wealth destruction" in which "well to-do people will lose up to 50 percent of their total wealth."

In today's "Squawk" appearance, he said that could still happen but possibly from higher levels because of the "asset bubble" caused by the Fed.

Faber is clearly in the ‘deflation camp’ now. Marc Faber: “One day this asset inflation will lead to a deflationary collapse one way or the other.”

Faber clearly pissed off with the Muppet talk about tapering.

“The question is not tapering. The question is at what point will they increase the asset purchases to say $150 billion , $200 billion, or a trillion dollars a month! That is the question.”

“Not only the gold market but all markets are rigged,” says Dr. Marc Faber.

With unlimited quantities of printed up money you can buy into every market in a way you substantially drive it. Vice versa you can then suddenly pull it out to manage a crash if so desired. And this is exactly what we see happening today.

But there is much more in the arsenal of market rigging than huge quantities of Hot Money. Naked shorting, round-trip trading, look-back accounting, just to name a few and then there is High Frequency Trading (HFT). When huge quantities of money are slushed into a market many HFT triggers will be broken thus driving the market even more exuberantly.

All of these tools are used by the too big to fail, too big to manage banks and the FED is using secret proxies to pretend there is a bond market from hedge funds on the Caymans to Belgium most recently.

So, the gold market contains only of paper and naked shorts while the stock market is blown up by printed up easy money. Food and oil prices are rigged up by these parasitical bankers. The banksters are the louse in the fur which has lost it’s shine.

It’s at the peeps now in order to, at least try, alter this situation for the better by speaking up about it and bring it to conversation with your fellow wet bag.

Having called for the demise of the hype/hope growth stocks, biotech, and social media schemes at the end of 2013, Marc Faber believes the weakness in those sectors is a signal of things to come

(and that the so-called "rotation" to quality stocks is fallacious in the medium-term).

Faber carefully notes that the size of markets allows some stocks to move up as others move down and so the overall market "looks" ok, but warns,

"we have already had a big break in parts of the market... but we haven't had the big break in the overall market,"

adding that "it's too late to buy the US stock market," confirming what we noted about Jeremy Grantham's dismal outlook for US equities in the medium-term (and how and when the bubble bursts).

Simply out, given yields around the world and the fundamentals, "individual investors have excessively optimistic expectations about their future returns," which is terrible news for the record amounts of Greater Fools piling in as professionals pile out.